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Ringgit extends gains after GDP beats forecast

KUALA LUMPUR (Nov 20): Ringgit advances for a second day after Malaysia reported Friday its economic growth accelerated in the third quarter to beat estimates.

* USD/MYR drops 0.1% to 4.1573

** Support 4.1442, 4.0962; resistance 4.1990, 4.2440, 4.2535

** NOTE: Malaysian Economy Expands at Fastest Pace in More Than 3 Years

* UOB has revised its view on Malaysia’s policy outlook to reflect the possibility of two rate hikes in 2018 given the strong growth momentum and rising demand-side price pressures, says Peter Chia, the bank’s FX strategist in Singapore

** Sees support for USD/MYR at 4.15 and resistance at 4.18

** Germany’s political crisis is unlikely to have a lasting impact on Asian FX for now and further flattening in U.S. yield curve should drive near-term dollar weakness and underpin regional currencies

* BNM is likely to stay on hold in 1H 2018, given policy uncertainties in the run-up to the general election and prospects of moderation in headline inflation next year, Goldman Sachs analysts Irene Choi and Goohoon Kwon wrote in report Friday

** While BNM has recently signaled a hawkish bias, the liftoff may come only in 3Q 2018 after it confirms the sustainability of domestic demand and a trend rise in core inflation

* Malaysia’s central bank Governor Muhammad Ibrahim said Friday any adjustment to its monetary policy would be a “normalization” rather than tightening

** Nation’s negative real rates are “not something abnormal” and that the authorities need to look into the degree of accommodativeness in monetary policy